The two companies could reach a deal as soon as this week, Bloomberg reported, citing people with knowledge of the matter.(http://bloom.bg/1W2vogN)

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Shares of SanDisk, which has a market capital of about $14.30 billion, rose 8.4 percent in extended trading on Monday. Western Digital shares were down nearly 2 percent.

Western Digital declined to comment. SanDisk did not immediately respond to a request seeking comment.

Bloomberg reported on Oct. 13 that besides Western Digital, Micron Technology Inc was also in talks with SanDisk about a possible acquisition. Micron's shares were down 1.6 percent.

SanDisk shares have risen 16.6 percent since the report.

However, any deal with SanDisk will require a sign off from Toshiba. SanDisk uses Toshiba's foundries to make its chips and the two have an important intellectual property-sharing joint venture.

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Analysts have said Toshiba is more likely to accept Western Digital as a buyer for SanDisk than Micron, a rival memory chip maker.

Western Digital, which has a market capital of about $22 billion, is also expected to receive a $4-billion cash infusion from China's state-backed Tsinghua Holdings Co Ltd [TSHUAA.UL], if the deal passes regulatory scrutiny in the United States.

SanDisk, which is scheduled to report quarterly results on Wednesday, has grappled with falling prices in the flash memory market and lean inventory levels.